Regulators set to clear drug giants’ merger

Date: 23/03/2000

By Renée Cordes

EU ANTI-TRUST regulators are expected to give their blessing to the proposed merger between US pharmaceutical giants Monsanto and Pharmacia & Upjohn, following pledges from the firms involved to discontinue sales of some drugs.

The European Commission extended the deadline for ruling on the tie-up by two weeks, until next Thursday (30 March), after the companies agreed to make minor concessions to allay competition concerns. These included a promise to stop selling some medicines, such as pain relievers, in the Scandinavian market.

Analysts say that these undertakings should be enough to ensure fair competition in a rapidly consolidating sector and believe the two firms have done enough to secure regulatory approval for the deal on both sides of the Atlantic without making further concessions.

"We are hopeful that the companies and EU regulators have now been able to work out their differences," said Tom Burnett, president of Merger Insight in New York. "When you are talking about two multi-billion-dollar companies, this is a small bone to throw at regulators."

This view was echoed by Paul Leming, a New York analyst at ING Barings. "I would be shocked if this deal proved to be a difficult one to receive approval from the authorities," he said. "There is not a great deal of overlap, and I certainly expect the companies to be able to come up with a package satisfactory to the EU."

The deal is also expected to be cleared by US anti-trust officials within a few weeks.

The prediction comes three months after the two companies announced that they planned to join forces to create a powerful new competitor in the global drugs market.

The new entity, to be called Pharmacia Corp., will have one of the strongest sales forces in the world; an expanding product portfolio with new drugs in the pipeline including treatments for glaucoma, bladder problems and colorectal cancer; and an annual research and development budget of more than €2 billion.

The two firms had combined 1999 sales estimated at more than €17 billion, with over €11 billion coming from pharmaceuticals and more than €5 billion from agricultural sales. With the pharmaceuticals sector forecast to grow at an annual rate of 15% this year, led by strong sales of prescription drugs, the combined business is expected to achieve annual earnings per-share growth of more than 20%.

Both companies were due to hold separate shareholders meetings today (23 March) to discuss and vote on the planned merger. Paul Fitzhenry, a spokesman for Pharmacia & Upjohn, said last week that the firms expected to complete their deal early in the second quarter of this year, ahead of schedule.

EU anti-trust regulators are expected to give their blessing to the proposed merger between US pharmaceutical giants Monsanto and Pharmacia & Upjohn, following pledges from the firms involved to discontinue sales of some drugs.